company presentation june 1, 2010 jiying wang yonghui wu

Company Presentation

June 1, 2010

Jiying Wang

YongHui Wu

Agenda

• Recap of Recommendations• Sector Summary• NII Holding Analysis• Verizon Analysis• Conclusion

Recap of Recommendation

• Increase SIM holding by 30 basis points to bring it to 4%

• Sell Verizon by 101 basis points

• Increase NIHD by 131 basis points

Sector Summary

Sector S&P 500 Weight SIM Weight +/-

Consumer Discretionary 10.55% 10.44% -0.11%

Consumer Staples 10.91% 11.71% 0.80%

Energy 11.18% 9.76% -1.43%

Financials 16.47% 11.41% -5.07%

Health Care 11.55% 14.63% 3.07%

Industrials 10.76% 13.10% 2.34%

Information Technology 18.91% 20.18% 1.27%

Materials 3.45% 1.64% -1.82%

Telecommunication Services

2.73% 3.70% 0.98%

Utilities 3.48% 2.10% -1.38%

Cash 0.00% 1.26% 1.26%

Dividend Receivables 0.00% 0.08% 0.08%

  100.00% 100.00% 0.00%

Sector Holdings

Current Recommended +/-

SIM Holding 3.7% 4% 0.3%

NIHD 2.69% 4% 1.31%

VZ 1.01% 0% -1.01%

Target Prices

Company Current Price Target Price Dividend Upside Potential

NIHD $36.70 $60 N/A 64%

VZ $27.52 $32 6.8% 16%

NIHD Overview

• Funded in 1995 as Nextel International, Inc. and changed its name to NII Holdings, Inc. in December 2001

• Providing fully integrated mobile communication services in selected Latin American markets

• Currently operating in Argentina, Brazil, Mexico, Peru and Chile

NIHD Business Analysis

• Market Cap of $5.71b• High Beta of 2.09• Company in growth phase

– High growth rate– Heavily financed through debt

• Possible factors to affect performance– Exchange rate– Interest rate

NIHD Financial Analysis

NIHD Financial Analysis

NIHD DCF Analysis

NIHD Sensitivity Analysis

Discount rate = 10%

Terminal growth rate =3%

Current price $36.7Implied equity value/share $66.0Upside potential 80%

NIHD Valuation Analysis

Average price = $60

Absolute Valuation

High Low Median Current #Your Target Multiple

*Your Target E, S, B, etc/Share

Your Target Price (F x G)

A. B. C. D. E. F. G. H. P/Forward E 34.3 6.7 19.0 17.8 19.0 2.3 43.70 P/S 109.6 0.5 3.5 1.5 2.5 30.0 75.00 P/B 16.9 1.2 7.7 2.5 3.8 15.96 60.65 P/EBITDA 213.98 1.95 12.62 5.14 8.5 7.76 65.96 P/CF 36.5 2.8 13.2 7.6 10.0 5.25 52.50

Potential Catalysts & Risks

Catalysts

• Global economic recovery

• Growth of emerging markets

• Expansion of 3G markets

Risks

• Exchange rates

• Possible double dip recession

Brazilian Real to USD

Chilean Peso to USD

Mexican Peso to USD

Argentine Peso to USD

Peruvian Nuevo Sol to USD

Verizon Overview

The largest mobile operator in the States.

The second largest US-based telecom company.

Two major business lines:• Domestic wireless Offer wireless voice and data products, and other value-added services, as well as sells

equipment.

• Wireline Provide voice, Internet access, broadband video and data, next generation Internet protocol (IP)

network services, network access, and long distance services to consumers, carriers, businesses, and government customers.

VZ Business Analysis

• Market Cap of $77.79b• Beta: 0.62• Company in mature phase

– Slow growth rate of wireless unit– Wireline unit is slightly decreasing

• Possible factors to affect performance– GDP growth– Consumer confidence– Unemployment rate– Interest rate

VZ Financial Analysis

VZ Financial Analysis

VZ DCF Model

VZ Sensitivity Analysis

Current price $27.52Implied equity value/share $31Upside potential 12.65%

Discount rate = 9.5%

Terminal growth rate =3%

VZ Valuation Analysis

Absolute Valuation

High Low Median Current #Your Target Multiple

*Your Target E, S, B, etc/Share

Your Target Price (F x G)

A. B. C. D. E. F. G. H.

P/Forward E 17.6 11.1 12.9 12.7 13 2.33 30.29

P/S 1.5 0.8 1.2 0.8 1 38.27 38.27

P/B 2.7 1.7 2.2 2.1 2.5 13.83 34.58

P/EBITDA 5.22 2.69 3.50 3.03 3.5 9.59 33.57

P/CF 6.0 3.6 4.3 3.6 4 8.07 32.28

Average price: $34

VZ Summary

Catalysts:

4G Technology

Verizon iphone!

Risks:

Its Wireline unit declines year by year and offsets the benefits generated from Wireless unit.

Changes of regulation

Increased competition

Verizon’s financial performance is not very satisfactory.

NIHD vs. VZ

Five Year Stock Comparison

Conclusion

Verizon is a good stock but NIHD just performs better. So we decide to:

• Sell Verizon (101 BP)

• Buy NIHD (131 BP to 400 BP)

• Total Telecom sector holdings – 400 BP (an increase of 30 BP)

Q&A